Analytics, News, and Forecasts for CFD Markets: currency news — 06-08-2020.

FXStreet reports that analysts at Wells Fargo note that a decline in initial jobless claims for both regular and Pandemic Unemployment Assistance benefits alongside a drop in continuing claims suggests the jobs recovery has not gone into reverse. 

“By a number of accounts the jobs recovery has lost momentum over the past month, but the latest jobless claims figures hint at conditions stabilizing if not improving once again. Initial claims fell to 1.19 million for the week ending August 1. Seasonal adjustment is tricky for the claims data in July due to the varying degree and timing of auto plant shutdowns, but the 4-week average on initial claims signaled some modest improvement on trend.”

“Initial claims for the Pandemic Unemployment Assistance program also posted the biggest weekly drop since late May. Continuing claims for the week ending July 25 more than reversed the prior week’s rise. In short, new layoffs and the ranks of the unemployed remain strikingly high, but today’s report alleviates concern that the jobs recovery has gone into reverse.”

“There remains a massive degree of uncertainty around estimates for payrolls tomorrow given the fast-moving and unprecedented scale of changes in the labor market in recent months.”

• Notes that monetary policy and fiscal policy are only a bridge to managing health care crisis
• One area where aid hasn't been as effective is help to small and mid-sized businesses
• Fed's asset purchases are not free and may ultimately have an effect on the dollar, don't want to do more than we have to
• Concerned about the growth of US government debt and the implications this has for US
• Rates are going to stay low until we make more progress on goals of maximum employment and price stability
• Says he will keep an open mind about yield curve control (YCC)

• Says that bill must include scientific plan to defeat the virus
• Bill needs to be focused on disenfranchised and those who need it the most
• U.S. needs comprehensive testing to reopen the economy
• Hopes President Trump does extend moratorium on evictions

James Knightley, Chief International Economist at ING, notes that with virus fears on the rise, jobs being lost and incomes squeezed, they feel the second phase of the recovery will be much more challenging, especially in the absence of a new broad and substantial fiscal package.

"US economic output plunged 10.6% through the first half of the year. Yet as containment measures were eased through May and June the economy has bounced back strongly, led by the US consumer. There was certainly plenty of pent-up demand as we escaped the confines of our homes, but substantial stimulus from both the Federal Reserve and the Federal government undoubtedly fueled the recovery story."

"Aggressive central bank action lowered borrowing costs, kept credit flowing and supported confidence and asset prices. Meanwhile, a $2+ trillion fiscal package provided a critical lifeline to households and businesses. Unfortunately, there are growing challenges to the recovery story."

"Firstly, the recent spike in Covid-19 cases is hurting confidence. It is also leading many State Governors to reverse course on their re-opening plans as they worry about strains on their healthcare systems if rising infection rates are left unchecked. The result is that businesses that had re-opened are being forced to close again with workers losing their jobs."

"The Census Bureau’s new Household Pulse survey suggests that employment may have reversed much of its gains since May. Perhaps most critically for near-term consumer spending the US$600/week unemployment benefit boost given to 30 million claimants ended in July. Talks on another fiscal stimulus are dragging but in all likelihood, it might be replaced with something much smaller in size."

"So, with virus fears on the rise, jobs being lost and incomes squeezed, the second phase of the recovery will be more challenging. In the absence of a timely and substantial fiscal package we should be braced for the threat of weaker employment and spending numbers, which will provide a major test for financial market optimism on the “V” shaped recovery."

• Says both Democrats and many Republicans have “desire” to boost economy and health-care system ravaged by the pandemic
• Lawmakers are still at odds about how much coronavirus aid is appropriate
• Somehow lawmakers will resolve their differences, we do need to adjust extra unemployment aid amid coronavirus

FXStreet notes that the S&P 500 Index has extended the rally to what is seen as a much tougher resistance test from the top of the February “pandemic” price gap at 3328/38. The Credit Suisse analyst team continues to look for this to cap for now and for a pullback/consolidation to emerge. 

“S&P 500 strength has extended to our next flagged resistance/objective and what we continue to see as important and what we would expect to be tougher initial resistance at the top of the February price gap at 3328/38.” 

“Whilst the underlying trend remains higher, we continue to expect 3328/38 to remain a tough barrier and look for this to cap for now for a fresh consolidation phase. Support for a setback moves to 3319/17 initially, then the lower end of the price gap from yesterday at 3307. Beneath here is needed to add weight to our consolidation scenario with support next at 3286/85, then 3271/61, but with this latter area then ideally holding.” 

“A direct and closing break above 3338 would be seen clearing the way for a move to 3373 next and eventually a challenge on the 3394 record high.”

The data from the Labor Department revealed on Thursday the number of applications for unemployment hit their lowest level of the COVID-19 pandemic area last week.

According to the report, the initial claims for unemployment benefits totaled 1,186,000 for the week ended August 1. That brought the number of job losses over the past twenty weeks (since the U.S. went into coronavirus lockdown in mid-March) to more than 55.3 million.

Economists had expected 1,415,000 new claims last week.

Claims for the prior week were revised upwardly to 1,435,000 from the initial estimate of 1,434,000.

Meanwhile, the four-week moving average of claims fell to 1,337,750 from an upwardly revised 1,368,750 in the previous week.

Continuing claims decreased to 16,107,000 million from a downwardly revised 16,951,000 in the previous week.

GBP rose against most major currencies in the European session on Thursday, supported by the latest monetary policy announcement by the Bank of England (BoE) and upbeat UK construction activity data for July.

The BoE announced its Monetary Policy Committee (MPC) voted 9-0 to maintain Bank Rate at 0.1 percent at its August meeting, as widely expected. The Committee also voted unanimously for the Bank to continue with its existing programs of the UK government bond and sterling non-financial investment-grade corporate bond purchases, maintaining the target for the total stock of these purchases at GBP745 billion. In addition, the BoE sounded less pessimistic about the prospects of the UK's economy, hit by the COVID-19 pandemic. The British central bank said that the UK's GDP "is not projected to exceed its level in 2019 Q4 until the end of 2021", later than its previous estimate of a recovery by the second half of 2021. But its projections for 2020 were less gloomy than in May.

Better-than-expected July PMI data for the UK's construction sectors also added to the positive sentiment. The IHS Markit reported the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index climbed to 58.1 in July from 55.3 in the previous month, beating economists' forecast of 57.0. The latest reading signaled the quickest expansion of overall construction work since October 2015. Residential building was the major growth driver in July, with activity increasing to the greatest extent since September 2014.

FXStreet reports that FX Strategists at UOB Group now expect USD/CNH to drop further on a breach of the 6.9300 level.

24-hour view: “While we held the view that USD ‘could dip below 6.9645’ yesterday, we did not anticipate the subsequent sharp sell-off that sent USD to a low of 6.9325. The sharp and rapid decline is severely oversold and further sustained weakness is unlikely for today. USD is more likely to consolidate and trade between 6.9350 and 6.9590.”

Next 1-3 weeks: “Our latest narrative was from Monday (03 Aug, spot at 6.9850) where we highlighted that ‘the downside risk still appears to be higher’ and added, ‘USD has to crack and close below the July’s low of 6.9645 before a sustained weakness can be expected’. While we are aware that 6.9645 is a critical support, we did not quite anticipate the sharp sell-off upon the break of this level (USD cracked 6.9645 and plunged to a low of 6.9325 yesterday). The current movement is viewed as the start of a negative phase and a break of the next critical support at 6.9300 could lead to a quick move to 6.9050. Resistance is at 6.9550 but only a break of 6.9730 (‘strong resistance’ level) would indicate that our view is wrong.”

FXStreet notes that USD/CHF seems to be resuming the core bear trend, reinforcing the view that a major top is in place with support seen back to 0.9056/47 before the 0.9000 psychological mark. On the flip side, resistance moves to 0.9139, per Credit Suisse.

“USD/CHF is back under pressure with the core bear trend resuming, after having partially unwound its oversold condition, thus adding further weight to the view that strength was indeed only corrective and that a major top is in place.” 

“We see support initially at the July and current August lows at 0.9056/47, ahead of a major psychological inflection point at 0.9000, where we would expect to see fresh buyers at first to unwind the already oversold condition. Beneath here though would further reinforce the strong downtrend and see support thereafter initially at 0.8986.” 

“Resistance is seen initially at 0.9091, then 0.9109, ahead of 0.9139, removal of which would ease the immediate downside pressure and suggest further near term consolidation. Resistance is seen thereafter at 0.9230/41, where we would then expect to see a more important effort to cap once more.”

FXStreet reports that according to economists at Westpac, the loonie is likely to amble in a 1.30-1.35 range into year’s end. 2021 will be likely a more auspicious year for CAD as vaccines are deployed and global recovery lifts up pace.

“Canada has not covered itself in glory lately. The recent Fitch downgrade underscores rising fiscal risks, while PM Trudeau and his government have been wounded by a government contract ethics scandal.”

“High frequency alternative data show the pace of rebound has lost some of its zest and the BoC remains among the more aggressive central banks, the Bank’s balance sheet growth approaching +20% of GDP since March 2020, well ahead of G10 peers.”

“USD/CAD likely to amble in a 1.30-1.35 range into the year's end. 2021 likely to be a more propitious year for CAD, as vaccines are deployed and global recovery picks up pace.”

FXStreet reports that FX Strategists at UOB Group suggest that the 105.00-106.60 range is expected to dominate the price action in USD/JPY in the next weeks.

24-hour view: “Yesterday, we held the view that USD ‘is likely to drift lower to 105.35; next support at 105.00 is unlikely to come into the picture’. Our view was correct as USD dropped to a low of 105.30 before recovering and traded sideways for the rest of the sessions. Momentum indicators are mostly neutral now and for today, USD is likely to consolidate and trade between 105.25 and 105.75.”

Next 1-3 weeks: “We highlighted on Monday (03 Aug, spot at 106.00) that the ‘outlook is unclear and USD could trade in a choppy manner within a broad 105.00/107.00 range’. However, USD traded in a relatively calm manner as it drifted lower over the past few days. The price action offers no fresh clues and for now, we continue to expect USD to consolidate, albeit within a narrower range of 105.00/106.00. Looking forward, only a clear break of 104.70 would indicate that USD is ready to tackle the 104.00 level.”

FXStreet notes that NZD/USD remains supported by global risk sentiment, weaker USD, relative New Zealand’s economic and COVID outperformance and higher NZ commodity prices. Analysts at Westpac stay biased slightly higher on the kiwi, targeting 0.6750.

“NZD/USD’s break above 0.6600 has been maintained but it hasn’t made much additional headway and thus remains only slightly biased to the upside. Multi-month, though, we remain bullish, targeting 0.6750.” 

“The fundamental backdrop remains supportive: trend decline in the USD, global demand for risky assets, unprecedented fiscal and central bank stimulus, NZ economic (and COVID management) outperformance, and China’s recovery boosting demand for NZ commodities.”

• But does not think have to comprehensively close shops again
• May have to re-look at what kind of events/celebrations can take place
• Some people are failing to take the pandemic as serious as they should be
• Travelers returning to Germany from risk regions will face mandatory coronavirus tests from Saturday

Reuters reports that Greece's jobless rate rose to 17.0% in May from an upwardly revised 15.7% reading in the previous month, data from the country's statistics service ELSTAT showed on Thursday.

It was the lowest jobless rate since June 2011 but the highest reading in the last nine months.

Seasonally adjusted data showed the number of unemployed at 764,912 people, with those aged up to 24 bearing the brunt of being out of work.

Among younger persons aged 15 to 24, the jobless rate rose to 37.5% from 32.2% in the same month in 2019. Greece's jobless rate, which hit a record high of 27.8% in September 2013, had been falling since but remains the highest in the euro zone.

Greece's 2020 budget projected growth picking up this year, helping to drive joblessness down to 15.6% but a government-imposed lockdown to stem the spread of the new coronavirus pandemic has thrown forecasts off.

The EU Commission estimates unemployment in Greece will rise to 19.9% this year, projecting the economy will contract by 9.0%.

FXStreet reports that AUD/USD looks on track to make a run at 0.7295 as the US dollar bear trend continues though the Australian economy appears to be deteriorating, according to economists at Westpac.

“DXY’s 7.5% depreciation since late-May is eye-catching but far from exceptional, much larger uninterrupted trend declines of 12-15% commonplace over the last 25 years. A shift to average inflation targeting at the Sep FOMC and Nov US election uncertainty likely to sustain the USD bear trend into year’s end.”

“Victoria’s new Covid-19 case count remains very high, reinforcing the introduction of stricter activity restrictions including a daily curfew in Melbourne and enforced closure of many businesses that had traded through the Q2 restrictions. PM Morrison says this could cut national GDP by 2.5ppt in Q3 and push the peak unemployment rate to around 10% rather than 9.25% in the recent statement.”

“Australia’s A$8.2 billion surplus in June was its 30th consecutive monthly surplus. Commodity revenues are very strong but services are playing a role too. Tourism abroad is Australia’s #1 import but will be effectively unavailable for months to come, keeping more A$ at home than are lost through the lack of foreign tourism and lower education exports.”

“USD weakness and bounce in both industrial commodities and precious metals suggests a test of resistance at 0.7295 though domestic economy continues to weaken.”

Reuters reports that Bank of England Governor Andrew Bailey said negative rates were part of the central bank’s stimulus options but they were not about to be used to steer Britain’s economy through the coronavirus crisis.

“They are part of our toolbox,” Bailey told reporters after the BoE published its latest outlook on the economy. “But at the moment we do not have a plan to use them.”

Bailey also said the central bank’s projection that unemployment would hit 7.5% - almost double its current rate - was a “very bad story” but it was expected to fall back over time and inflation was likely to rise back to the BoE’s target.

“So you can draw a conclusion from that about where policy is headed,” he said.

However, Bailey warned that the British economy faced big challenges ahead and the BoE was ready to provide more stimulus if needed.

“There are some very hard yards, to borrow a rugby phrase, to come. And frankly, we are ready to act, should that be needed.”

He also said the possibility of Britain failing to strike a trade deal with the European Union by end of this year was part of the downside risks that the BoE saw for the economy, but the COVID-19 pandemic was the biggest challenge.

FXStreet reports that NZD/USD is likely to keep navigating within the 0.6540-0.6710 range in the near-term, in opinion of FX Strategists at UOB Group.

24-hour view: “We expected NZD to advance yesterday but held the view that ‘a break of 0.6670 would come as a surprise’. NZD surprised us as it rose to a high of 0.6673 before easing off quickly. Upward momentum has hardly improved and for today, NZD is likely to consolidate and trade between 0.6620 and 0.6670.”

Next 1-3 weeks: “We highlighted yesterday (03 Aug, spot at 0.6620) that ‘a break of 0.6600 would indicate that NZD has moved into a consolidation phase’. NZD subsequently dropped to 0.6575 before settling on a soft note at 0.6613 (-0.24%). For the next 1 to 2 weeks, NZD is likely to trade sideways, expected to be between 0.6540 and 0.6710. Looking forward, a clear break of 0.6540 would suggest the start of a deeper pullback in NZD.”

According to the report from IHS Markit/CIPS, UK construction companies signalled a sharp and accelerated expansion of business activity during July, led by another strong increase in house building. New orders also picked up for the second month running, with survey respondents commenting on a boost to sales from easing lockdown measures and the restart of work on site. However, the speed of recovery was insufficient to prevent additional cuts to employment numbers across the construction sector and the rate of job shedding was faster than in June.

At 58.1 in July, up from 55.3 in June, the headline seasonally adjusted UK Construction Total Activity Index registered above the 50.0 nochange threshold for the second consecutive month. The latest reading signalled the steepest expansion of overall construction work since October 2015. 

Residential building was the main growth driver in July, with activity increasing to the greatest extent since September 2014. Survey respondents commented on the release of pent up demand and reduced anxiety among clients.

Commercial work and civil engineering activity both expanded at slightly quicker rates than in June. Growth was often attributed to the catch up of work that had been delayed during the coronavirus disease 2019 (COVID-19) pandemic.

Construction firms are optimistic overall about the prospect of a recovery in business activity during the next 12 months. Around 43% of the survey panel expect a rise in output over this period, while only 30% forecast a fall. However, confidence moderated since June, which was linked to concerns about the economic outlook and a lack of new work to replace completed projects.

According to the report from IHS Markit, the Eurozone Construction Total Activity Index rose from 48.3 in June to 48.9 in July, indicating the weakest decline in construction activity across the eurozone in the current five-month sequence. Survey data showed Italy recorded construction output growth, while Germany and France posted declines.

The level of work undertaken on home construction projects in the eurozone was fractionally lower at the start of the third quarter. A decline in housing construction activity in France was almost offset by increases in home building activity in Germany and Italy.

Commercial building activity across the eurozone continued to fall in July. The rate of decline slowed further from April's record, but was marked overall. The decline was driven by Germany and France, with the latter doing so after an increase in June. Italy reported further growth, albeit the slowest in the current three-month sequence.

Meanwhile, eurozone civil engineering activity fell further in July, extending the current sequence of contraction to a year. The rate of decline moderated from June and was modest overall. National data revealed that only France posted growth, while Germany and Italy continued to report a decline in civil engineering. Among the eurozone's three largest economies, only Italy registered growth in construction output during July, which remained modest overall. On the other hand, Germany and France registered declines in construction activity, with the former recording the steeper rate of decrease.

Overall sentiment among eurozone building companies turned positive in July, as indicated by the Future Activity Index rising above the neutral 50.0 level for the first time since February. Italian constructors' confidence surged to the highest for over nine years, with a number of firms citing the 110% ecobonus as a reason for optimism. 

CNBC reports that China’s economic growth indicators are lopsided, pointing to possible downside risks for the country in the second half of 2020 as it tries to recover from the coronavirus pandemic, an analyst said Thursday.

“On Covid, the Chinese deserve a lot of credit. They certainly locked down much of the country,” said Andrew Collier, managing director at Orient Capital Research, a Hong Kong-based research firm.

“Even though they may have launched the virus, they were pretty good at quelling it. That’s the advantage of an authoritarian regime,” he told CNBC.

Recent data showed China’s June retail sales fell 1.8% from a year ago, much worse than the 0.3% growth analysts forecast in a Reuters poll. That came after a 2.8% drop in May.

But that was still better than sharp drops in the rest of the world, said Collier.

“The problem with the stimulus measures and the economic indicators is that it’s very lopsided … it’s very focused on online sales and also on infrastructure build,” he said.

Steel and iron ore production have been strong in China, “but nobody can quite figure out where all these metals are going,” he said, as auto sales have been rather weak even if the raw materials are going to the construction of infrastructure and property.

“There is some suspicion there’s a lot of stockpiling,” said Collier.

He said tensions between the U.S. and China are “worrisome” with President Donald Trump seeming to use Secretary of State Mike Pompeo as a way to reignite hostilities toward Beijing as the president falls behind in the polls. But, investors will likely shrug this off, Collier said.

“It is quite true that Trump is a bit of a paper tiger at this point … A lot of what he does is more flash than actual changes and it doesn’t look like they are going to rewrite the script on the U.S.-China trade relation, so there probably is going to be more noise than it is actual reality,” said Collier.

Senior U.S. and Chinese officials are reportedly expected to review the implementation of their phase one trade deal next week.

Collier said he would keep his eyes on actual supply and demand.

“The bigger issue is whether the stockpiling of oil and the stockpiling of steel and iron ore is related to actual demand or whether this is just priming the pump to keep the economy going,” he said.

Should there be less demand than supply for such commodities, what could happen in the rest of 2020 is that demand for commodities will drop off. But there is also an upside if the retail sector continues to do better than the rest of the world, he said.

“There is likely to be some downside risk in the second half, but on the other hand, China is doing better than the rest of the world in terms of Covid,” said Collier.

During today's Asian trading, the US dollar fell against the main world currencies, while the british pound strengthened after the Bank of England meeting.

The ICE Dollar index, which shows the value of the US dollar against six major world currencies, fell 0.18% from the previous day.

The traders are watching the ongoing negotiations in Washington about a new package of stimulus measures in pandemic coronavirus. The White House and democratic leaders in Congress have reported some progress in discussions, but differences remain over a number of issues.

Vice Chairman of the Federal Reserve Richard Clarida said on Tuesday that he expects the US economy to recover in the 2nd half of 2020. At the same time, in his opinion, activity can return to the levels that were observed before the beginning of the COVID-19 pandemic, until the end of 2021. He also noted that the Federal reserve is ready to change its lending programs to ensure effective support for the economy.

Meanwhile, the Bank of England kept its benchmark interest rate at 0.1% at the end of the August meeting. The Bank of England also decided to leave the volume of the government bond repurchase program at 745 billion pounds.

Meanwhile, the chinese yuan today retreated from a five-month high against the dollar, set the day before, amid signs of increasing tensions between the US and China.

FXStreet reports that Bart Melek, head of commodity strategy at TD Securities, believes the rebalancing of the crude market will come into the next year. He expects WTI to rise toward recent highs just below the $45 mark, however, a higher trade range between $45 and $50 is not likely this year.

“With US demand continuing to recover, crude oil inventories dropping sharply for another week, OPEC+ very likely matching supply in line with demand increases and US production sliding over 2 million b/d since March, the crude market is very likely to rebalance into 2021. This, along with ample risk appetite, an upcoming trillion dollar US stimulus program and a vaccine on the horizon all suggest that WTI crude may test recent highs, moving toward resistance just under $45/bbl.”

“Given OPEC+ will continue to match its sequestered supply to the growing demand and coronavirus risks still remain a major global demand risk factor, a sustained breakout into a higher trading range of $45-50/bbl is unlikely this year.”

eFXdata reports that TD Research discusses the current drivers of the FX markets.

"Expectations of further stimulus bets have sparked a turnaround Tuesday, undermining the USD once again. The catalyst falls to the prospects that US policymakers have made some progress on stimulus discussions. The hopes are that legislation will pass next week, which has offered another dose of fuel for risk sentiment.  Meanwhile, gold has marked new highs while the EUR sits within striking distance of 1.20," TD notes.

"We discuss the shifting correlations of FX to our risk gauge GMRI, highlighting the shifting nature of a safe haven. It will take years to officially challenge the USD's reserve status but that doesn't mean we can't see a major asset allocation shift. Equally important, we note the surge in the USD's beta to MSCI World (ex-US) during the past four years. A sign that equity flows will remain important drivers of FX," TD adds. 

According to provisional results of the Federal Statistical Office (Destatis), real (price adjusted) new orders increased by a seasonally and calendar adjusted 27.9% in June 2020 compared with May 2020. Economists had expected a 10.1% increase. Compared with June 2019, the decrease in calendar adjusted new orders amounted to 11.3%. Excluding major orders, real new orders in manufacturing seasonally and calendar adjusted were 23.8% higher than in the previous month.

Compared with February 2020, the month before restrictions were imposed due to the corona pandemic in Germany, new orders in June 2020 were 11.3% lower in seasonally and calendar adjusted terms.

Domestic orders increased by 35.3% and foreign orders rose by 22% in June 2020 on the previous month. New orders from the euro area went up 22.3%, and new orders from other countries increased by 21.7% compared with May 2020.

In June 2020 the manufacturers of intermediate goods saw new orders increase by 10.6% compared with May 2020. The manufacturers of capital goods saw an increase of 45.7% on the previous month. Regarding consumer goods, new orders rose 1.1%.

New orders in the automotive industry increased markedly in June 2020 (+66.5% on the previous month). However, new orders were still 12.2% lower than in February 2020.

For May 2020, there was a decrease of 10.4% compared with April 2020 thus confirming the provisional result published.  

According to the full statement of the BOE August monetary policy meeting decision, The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. In that context, its challenge at present is to respond to the economic and financial impact of the Covid-19 pandemic. At its meeting ending on 4 August 2020, the MPC voted unanimously to maintain Bank Rate at 0.1%. The Committee voted unanimously for the Bank of England to continue with its existing programmes of UK government bond and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, maintaining the target for the total stock of these purchases at £745 billion.

The outlook for the UK and global economies remains unusually uncertain. It will depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these factors. The MPC’s projections assume that the direct impact of Covid-19 on the economy dissipates gradually over the forecast period. Given the inherent uncertainties regarding the evolution of the pandemic, the MPC’s medium-term projections are a less informative guide than usual.

UK GDP is expected to have been over 20% lower in 2020 Q2 than in 2019 Q4. But higher-frequency indicators imply that spending has recovered significantly since the trough in activity in April. Payments data suggest that household consumption in July was less than 10% below its level at the start of the year.  Housing market activity appears to have returned to close to normal levels, despite signs of a tightening in credit supply for some households. There is less evidence available on business spending, but surveys suggest that business investment is likely to have fallen markedly in Q2 and investment intentions remain very weak.

Employment appears to have fallen since the Covid-19 outbreak, although this has been very significantly mitigated by the extensive take-up of support from temporary government schemes. Surveys indicate that many workers have already returned to work from furlough, but considerable uncertainty remains about the prospects for employment after those support schemes unwind. In the near term, the unemployment rate is projected to rise materially, to around 7½% by the end of the year, consistent with a material degree of spare capacity.

In the MPC’s central projection, GDP continues to recover beyond the near term, as social distancing eases and consumer spending picks up further. Business investment also recovers, but somewhat more slowly. Unemployment declines gradually from the beginning of 2021 onwards.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2006 (817)

$1.1963 (1214)

$1.1925 (1273)

Price at time of writing this review: $1.1880

Support levels (open interest**, contracts):

$1.1845 (157)

$1.1822 (1294)

$1.1787 (452)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 7 is 65819 contracts (according to data from August, 5) with the maximum number of contracts with strike price $1,1400 (4028);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3262 (2862)

$1.3221 (115)

$1.3186 (533)

Price at time of writing this review: $1.3134

Support levels (open interest**, contracts):

$1.2987 (1384)

$1.2943 (246)

$1.2847 (142)

Comments:

- Overall open interest on the CALL options with the expiration date August, 7 is 21881 contracts, with the maximum number of contracts with strike price $1,3250 (2862);

- Overall open interest on the PUT options with the expiration date August, 7 is 20478 contracts, with the maximum number of contracts with strike price $1,2400 (1511);

- The ratio of PUT/CALL was 0.94 versus 0.92 from the previous trading day according to data from August, 5

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.